SPX recovered 9.0% in July: is it still just a bear market rally?

A 9.0% rebound in the benchmark S&P 500 index last month is more than just a bear market rally, says Jim Lebenthal. He’s the Chief Equity Strategist at Cerity Partners.

Lebenthal’s remarks on CNBC’s ‘Halftime Report’

Lebenthal drives his optimism primarily from the energy prices that have been in a downtrend since early June. This afternoon on CNBC’s “Halftime Report”, he said:

Gasoline futures broke below $3.0 a gallon today. That’s off 30% from the high. You haven’t seen that full 30% show up at the pumps. But it will show up; it’ll help consumption and sentiment not just for consumers but also for investors.

Last week, the Bureau of Economic Analyst said the U.S. economy contracted at an annualised pace of 0.9% in the second quarter of 2022 that satisfied the “technical” definition of a recession.

Market has been resilient in the face of economic data

Interestingly, though, the stock market continued to push up even after the Federal Reserve raised rates by another 75 basis points in July. Giving more reasons for his constructive view, Lebenthal said:

The labour market is strong; Fed Funds Rate is saying we’re going to peak in a few months. That’s bullish. And the single most important thing is inflation coming down, period.

PCE Price Index – an inflation gauge that the central bank prefers, however, came in at 6.8% on Friday; a new forty-year high. Also on Monday, Piper Sandler reiterated that the SPX is expected to end the year around 4,775 level that represents another 15% upside from here.

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